The score will take care of itself ~ Bill Walsh

11ish Investing

Time to Take Lidar Seriously

Yes I know I know. Lidar sounds like Ligar.

 

Lidar is not just a stupid-sounding word, guys. Lidar is an amazing next-gen tech, invented by super nerds (and I say this lovingly btw) that might already be embedded in some of the stuff you use today. Let’s talk about what it is, why you should know what it’s used for, who uses it today, and how you can invest in Lidar today. Like all my talks, we’re going to conclude with some of my thoughts on risks

 

What is Lidar

Lidar uses the combination of lasers, scanners, and GPS to create light waves. This allows you to map the density and distance of objects with incredible accuracy. The first I heard of Lidar was when Joe Rogan talked about lidar being mounted on helicopters for geologists and they’ve used to map undiscovered man-made structures in the dense forest of the Amazon, which is sick but since then lidar has become commercialized into our daily lives and most of us didn’t even know it!

 

In terms of emerging technology, where is it used today, in our pleb consumer lives? Two main verticals that are worth talking about right now, cars and phones. Almost all smart or self-driving cars are being built and tested with lidar. It’s just an efficient and fast way of grabbing objective information for your car computer to process and react to. 

 

The Elephant in the Room

The biggest opponent of Lidars in cars is Elon Musk, who thinks camera technology is more than enough and does NOT use it in Teslas. That being said Uber, Waymo, Toyota, Honda Volvo, Mercedes and many many more are ALL using lidar. 

 

With this kind of highly specialized technology, where both hardware AND software is important, there aren’t that many folks in the game. Also, considering that this kind of technology is contracted years at a time I personally choose the safest and most obvious choice, which is Velodyne. 

 

Velodyne is a company founded by the guy that invented Lidar. They’ve recently went public with a splash and I told a bunch of my friends internally that this company’s worth investing in. Well now it’s a lot more expensive but just as valuable.

Ford recently sold their stake after Velodyne finished SPACing, and many have looked at this as a negative, but I actually think this is a buying opportunity as the market overreacted. 

 

There are 2 other companies I think is worth considering for car related Lidar tech: Luminar and CGRO. Where Velodyne specializes in 360 degree technology, Luminar specializes in 120 degrees tech with an alleged longer range and fedality. However, the fact of the matter is I can’t find financial information on Luminar but we know for sure Velodyne is on its way towards profitability and is signing a lot of partnerships. 

 

As for CGRO is an Israeli lidar company that’s funded by softbank. Some of you may already know that if it’s funded by Softbank is an automatic negative to me because every company that I’ve invested in that had Softbank influence went south or no where for me.

 

A definite short-term risk I’d like to point out is that Apple’s hunting for a lidar partner for their smart cars project. Whomever Apple chooses will most likely tank everybody else’ stock. BUT news so far says Apple’s looking at Velodyne seriously so take this with a grain of salt.

 

As for Lidar outside of cars, Lidar is used in phones. There is HUGE potential in this. Since Lidar is used to judge the distance, shape, and density of stuff in front of it, it is already used by iPhones to be a more cognizant camera and take better pictures. This clearly works because a) Apple never pulls out bullshit hardware, only questionable software and b) now certain Android phones are also launching with lidar. The third and strongest case for lidar technology in mobile devices is the fact that Apple is going to use it in the Apple Glass. This means that unlike the old google glass technology where people were freaked out by its ability to see and record what’s in front of it, Lidar just sees shapes, so it is much less intrusive in terms of privacy. 

 

The Whale Play: Lidar for Consumer Electronics

Now what companies might you invest in is kind of a dicey story. First and foremost, Apple phones use technology from a company called Lumentum. Consequently, they both make a butt load of money. The problem is Lumentum is currently trying to acquire a company, called Coherent, but ended up in a bidding war with II-VI AND MKS Instruments, both offering SIGNIFICANTLY more money. 

On January 19, Lumentum offered $100 in cash and 1.1851 shares of Lumentum common stock per Coherent share, which amounts to an implied deal value of $5.7B. Coherent holders would hold a 27% stake in the combined company.

 

On February 8, Coherent announced receiving an unsolicited acquisition offer from MKS Instruments for $115 in cash and 0.7473 MKS shares per Coherent share. The implied deal value is $6B, about a 16% premium over Lumentum’s bid.

 

II-VI entered the fray with an offer of $130.00 in cash and 1.3055 in II-VI shares per Coherent share, which has an implied value of $6.5B, a 24% premium to Lumentum’s offer and 10% above MKS. With a $10.4B market cap, II-VI is the largest of the bidders. Within the offer, II-VI notes that Bain Capital has a strong interest in a potential equity investment in the resulting combined company.

 

When there’s a bidding war, nobody but the company getting acquired wins, so what I’m saying is right now might be a bad time to pick and choose. BUT it is absolutely the right tech to keep a close eye on and if you’re a gambling man, you can take an early stab. Also if you have the information you’d like to share with the rest of the 11ish collective, please let us know.

 

For the above reasons, I’m only invested in Velodyne right now, because I’d rather have a bit more certainty in my investments

 

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